U.S. Oil, Ethanol Say Billions to Upgrade Rail Safety too Costly

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December 6, 2013

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by Patrick Rucker (TD Waterhouse) Rail safety rules contemplated by U.S. regulators could require multibillion dollar upgrades to a tank car fleet that has helped spur domestic oil production and meet demands of a booming biofuel sector.
More flammable liquids such as ethanol and, increasingly, crude oil are carried on the tracks leaving regulators to consider tougher safety standards to prevent high-profile mishaps like a deadly incident in Canada over the summer and a 90-car crude train derailment in Alabama last month.
About 80,000 tank cars will need costly retrofits to satisfy regulators that a dangerous derailment will not immediately become a fiery disaster, a leading industry trade group estimates.
Most of those tank cars will either have to be retired or face at least $30,000 in time-consuming upgrades that put them out of service for months at a time, according to the Rail Supply Institute, the voice for tank car manufacturers.
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Under that stringent scenario, existing tank cars would be wrapped in an additional thermal jacket that could cost $23,500, according to one industry estimate.
But many industry sources doubt such a tough standard will be set and the RSI has asked for 10 years to meet whatever standards come.
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But the oil and ethanol sectors have said regulators should put more emphasis on track safety and the debate has pitted track owners advocating costly tank car upgrades against the industries that haul on those rail lines.
The American Association of Railways, the voice for track owners, has suggested that old tank cars get phased out and the others go back into a workshop for costly upgrades.
Refitting a tank car to the highest standards would cost more than $90,000, the RFA estimates.
“Rather than focusing exclusively on railcar design, a more prudent approach would be to invest in initiatives that address these root causes and keep the railcars on the tracks,” RFA President Bob Dinneen wrote the Department of Transportation. READ MORE and MORE (Renewable Fuels Association) READ letter
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